State's own body warns quality of life issues hitting competitiveness

Minister for Employment Affairs and Social Protection Regina Doherty at ‘Inclusive Growth and Social Fairness for Ireland and Europe’, hosted by the IIEA and the European Commission Representation in Ireland. Photo: Colm Mahady/Fennells

Ireland is an expensive place to run a business or for workers to live, according to the National Competitiveness Council's latest 'Cost of Doing Business in Ireland' report.

Any further erosion of competitiveness will make Ireland more vulnerable to Brexit, it warned. Last week Ireland dropped six places in a ranking of the world's most competitive countries. It's now ranked 12th of 63, according to a global survey by the IMD business school in Lausanne, Switzerland.

Meanwhile, in Dublin yesterday the senior European Commission official responsible for Social Affairs and Inclusion warned that access to affordable, full-time quality childcare here remains difficult.

Ireland is the most expensive in the EU for lone parents and second highest for couples when it comes to childcare, Joost Korte said.

He said childcare costs are a key factor behind the relatively low number of women in the Irish workforce and urged Social Protection Minister Regina Doherty to speed up implementation of the Single Affordable Childcare Scheme approved last December.

Mr Korte and Minister Doherty were attending a seminar in Dublin jointly organised by the Institute of International and European Affairs (IIEA) and the European Commission Representation in Ireland, and hosted by Dan O'Brien, Irish Independent columnist and chief economist at the IIEA. Separately yesterday, the State's own National Competitiveness Council (NCC) said Ireland remains an attractive location, but this risks being undermined by rising business and personal prices.

The sustained economic recovery here has also resulted in a series of upward cost pressures - including property, business services and labour costs and consumer prices that have the potential to undermine recent competitiveness gains.

Prof Peter Clinch, chairman of the NCC, said that quality of life issues for workers - including rent and childcare costs - feed into the labour market, where pressure points are emerging as the economy heads towards full employment.

"Improving the quality and affordability of life is particularly important for increasing labour market participation rates and ensuring Ireland is an attractive location for talent and investment,.

"In this regard, well-planned infrastructure, including sustainable housing, high quality public transport and adequate water infrastructure provides people with the opportunity to live near their work and enjoy a good quality of life, reduces traffic congestion and increases productivity," he said. For businesses, the NCC says a range of "hidden costs", including those associated with planning and payment delays, labour law compliance, transactions, cost to export and insurance costs are pressure points.

Ireland is out of kilter when it comes to the relatively high price of credit and if a business has to go to court to enforce a contract legal costs here are estimated to be higher and cases take longer than in other developed economies.

For business owners, the NCC notes that capital gains taxes, at 33pc, are high versus other markets including the UK, at 28pc.

However, the NCC Report found that the cost base for enterprises continues to be internationally competitive across a range of metrics, including labour cost growth - which has been modest throughout the recovery - electricity prices, the cost of starting a business, communication bills and average income taxes.

With Brexit, and potentially a trade war with the US, on the horizon, the openness of the economy leaves it particularly vulnerable to negative price and cost shocks which are outside the influence of Irish policymakers, the NCC said.

Unfavourable exchange rate movements, higher global energy prices and imported inflation from our major trading partners are already starting to be felt and are outside the control of policy makers in Ireland.